Coffee exports benefit from global shortages

Kenya’s coffee has found its way into new markets across borders amid a global shortage of the commodity. 

Meanwhile, farmers with the beans are enjoying bumper incomes. 

At the start of last year, coffee output responded well to improved export prices, reaching a high of $4.69 per kilogram by December, an increase of over 100 per cent from a price of $2.08 per kilogram in December 2008.

At the auction last month, average coffee prices hit $5.01 per kg — a 141 per cent jump over December 2008 prices.

“Farmers who took good care of their crop are getting compensated generously. The future is looking good for smallholder coffee farmers,” said Jeremy Block, the chairman of coffee buyers and exporters, C. Dorman Ltd.

However, the top price for Grade AA eased to $555 per 50kg, while the average stood at $236.34 per 50kg at the auction in March. 

Traders blamed the decline on there being few top quality coffees on offer. 

An official of the Kenya Coffee Producers and Traders Association (KCPTA) said: “We have not seen such high prices in the recent past.” 

At the March 23 auction, top grade AA hit a new high of Ksh52,875 ($702) per 50kg bag, but eased to Ksh38,250 ($ 510) the following week.

Coffee traders attributed the spike to low coffee quantities produced globally last year. 

Colombia has produced less “Colombia mild” coffee due to poor weather and El Nino rains among other factors, while Brazil has a deficit. 

The drought that hit the region last year impacted negatively on both coffee production and quality. 

Traders at the Nairobi Coffee Exchange have been scrambling for the few quality bags available at the auction. 

“We suffered from drought in key coffee producing areas, hence production is substantially down. But the deficit and production shortfalls in other Arabica producing nations, the reduction in quantity has been offset by increase in international coffee prices for the Arabica variety,” observed Mr Block. 

Most Kenyan coffee is exported to the Schengen countries led by Germany and Netherlands, but — increasingly — some of this coffee is finding its way to the US market.

Japan has been purchasing top quality coffee from Kenya for years. However, farmers are not benefiting much because of low production volumes.

“There is a shortage in quantities. Our farmers were discouraged earlier by poor governance in small holder co-operative societies,” said Ruth Kyatha, the chief executive officer of the Kenya Coffee Producers’ Association. 

Increasing production is now one of KCPTA’s key agendas: “We are planning to explore the possibilities of attracting coffee estate farming outside the traditional coffee areas,” she said. 

“My conservative estimate is that a careful smallholder can make a 200 per cent profit over costs, including using copper sprays for leaf rust and CBD (Coffee Berry Disease). As long as the international market can continue to trust the system, demand will remain strong for Kenya’s better quality coffees. However, earnings will depend on a farmer’s ability to increase top quality coffee production,” said Mr Block. 

Coffee officials say there is also room for improvement in quality. 

Mr Block maintains that good quality coffee will always earn much more than the cost of production. 

According to KCPTA, investments in the sector have declined over the years due to apathy. 

Farmers felt they were being cheated by the managers of co-operative societies, and a lot of effort needed to change their minds.

From: TheEastAfrican.com